Amazon shares rise as Q4 margins improve

From North America: Shares of Amazon (NASDAQ:AMZN) shot up over five per cent Wednesday morning, as the online retail giant released fourth-quarter earnings and revenue that missed expectations, but said its North American operating margin improved on investments in warehouses and a jump in holiday shopping.

Amazon said late Tuesday that its profit margin improved to 24.1 per cent, compared with 20.7 per cent a year earlier. Operating margin in North America widened to five per cent from 2.9 per cent a year earlier.

Operating income, considered a key measure of Amazon's business performance, came in at $405 million, compared with $260 million in the year-ago period.

Shares of the company were lately higher by 5.8 per cent, trading at $275.56 as at about 9:48 a.m. EDT.

For the three months that ended December 31, Amazon reported a 45-per-cent drop in net income of $97 million or 21 cents per diluted share, compared with $177 million or 38 cents per diluted share, a year earlier.

Sales increased, however, up 22 per cent to $21.27 billion, compared with $17.43 billion in the year-ago period.

Excluding a $178-million unfavorable impact from changes in foreign exchange rates throughout the quarter, sales grew 23 per cent compared with the fourth quarter of 2011.

On average, analysts polled by FactSet were expecting earnings of 28 cents per share on revenue of $22.26 billion.

“We’re now seeing the transition we’ve been expecting,” said founder and CEO Jeff Bezos. “After five years, eBooks is a multi-billion dollar category for us and growing fast – up approximately 70 per cent last year.

“In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just five per cent.”

During its fourth quarter, Amazon said North America segment sales, which include the company’s U.S. and Canadian sites, grew 22 per cent to $12.1 billion.

Worldwide media sales increased eight per cent to $6.5 billion in the quarter, while worldwide electronics and other general merchandise sales grew 28 per cent to $13.9 billion.

Worldwide operating margin edged up to 1.9 per cent from 1.5 percent a year earlier.

Amazon said that for the second year in a row, its tablet was the most popular item for customers as the Kindle Fire HD remained the company’s #1 best-selling product.

At year-end, Kindle Fire HD, Kindle Fire, Kindle Paperwhite and Kindle held the top four spots on the Amazon worldwide best seller charts since launch, the company said.

Looking ahead, the company said its results are “inherently unpredictable” as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, along with other various factors may affect its bottom line.

For the first quarter of fiscal 2013, the company expects sales to be between $15.0 and $16.6 billion, while operating income is expected to be between a loss of $285 million and profit of $65 million.

Analysts are forecasting first quarter per share earnings of 34 cents on revenues of $16.86 billion.

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

Sign up to Proactive Investors

Andrew McCrea's Research Reports
Sign up to Andrew McCrea's Research Reports and Receive Latest Research & Flash Trades